US petrol prices have dropped below $4 a gallon for the first time since Russia’s invasion of Ukraine, as fears of a looming recession put the brakes on soaring fuel markets, tempering rampant inflation.
The average price of a gallon of gasoline tumbled to $3.99 on Thursday, according to motoring group AAA. That leaves the price at the pump down by a fifth since hitting record levels over $5 in mid-June, in the fastest decline since the 2008 recession.
“It feels like a pretty big decline to go from a five to a four to a three,” said Patrick De Haan, head of petroleum analysis at GasBuddy, a price tracking service. “It’s good news for beleaguered motorists that were hit by record high prices this year.”
The slide in prices is not confined to the US, as jitters over an impending global economic slowdown and a corresponding drop-off in driving offset some of the upheaval in oil markets triggered by the war in Ukraine. The Energy Information Administration has reported US petrol demand over the last four weeks has been running about 6 per cent lower than a year ago, at 8.9mn barrels a day.
European prices have fallen 9 per cent from their June highs to €1.86 a litre ($7.32 a gallon), according to the latest European Commission data. In the UK, they are down 8 per cent to £1.76 a litre ($8.20 a gallon), according to the RAC motoring group. Heavier taxation in those jurisdictions, coupled with the strength of the dollar, mean the drop has been shallower than in the US.
The rapid fall in American prices has helped to cool inflation. The US consumer price index rose at an annual rate of 8.5 per cent in July, decelerating slightly on the back of lower petrol prices.
The US has one of the world’s highest car ownership rates, with around 92 per cent of households having access to at least one vehicle, according to the latest census, making petrol prices a prominent political issue. The country consumes about a fifth of the world’s oil despite being home to just 4 per cent of the world’s population.
High petrol prices have become a political liability for US President Joe Biden, despite his limited ability to influence them. In response, the president has taken measures including releasing record volumes of crude oil from the country’s emergency stockpiles and leaning on producers to pump more supply.
The price of diesel, used in industries such as trucking and agriculture, has also fallen sharply. It sat at $5.08 on Thursday, according to the AAA, down 12 per cent from $5.81 in June.
The fall in prices is a sharp reversal from recent months. Prices at the pump were already escalating rapidly at the beginning of the year, fuelled by resurgent post-pandemic demand, when Russia’s invasion of Ukraine in February shook global oil markets and accelerated the climb. Brent crude, the international oil marker surged past $100 a barrel.
By mid-June, soaring crude prices and tight global oil refining capacity market had pushed US petrol prices to $5.02 a gallon — their highest level ever level without adjusting for inflation.